Refunds Offered After $6M In Property Taxes Prepaid In Alexandria

ALEXANDRIA, VA—More than 650 Alexandria residents have prepaid over $6 million in 2018 property tax bills in hopes of receiving the State and Local Tax (SALT) deductions before they are significantly reduced next year. After the IRS advised that prepayments wouldn't be deductible on the 2017 return, the city has begun offering refunds.

Homeowners have been rushing to pay property taxes throughout December before the new federal tax takes effect on Jan. 1, 2018. Property owners waiting until the 2018 due dates likely would not be able to deduct the full amount of property taxes on their 2018 returns under the new federal tax code, which caps state and local deductions on federal tax returns at $10,000.

However, a new IRS news release warns taxpayers that prepayments based on real estate taxes not assessed in 2017 may not be eligible for deduction. In addition, those subject to the Alternative Minimum Tax would see no benefit from prepaying since it bars those individuals from deducting state and local taxes.

Taxpayers' prepayments would be based on estimations of tax liability from 2017. There would be no way of knowing the 2018 assessment the IRS requests since state and local law mandate assessments be based on the market value as of Jan. 1, 2018, and Alexandria City Council doesn't set the new tax rate until May 2018.

The City of Alexandria has recommended consulting a tax professional before deciding to prepay but has been accepting prepayments through Sunday, Dec. 31. Because tax rates for 2018 have not been finalized, residents would estimate their tax bill based on 2017 taxes and pay the difference when the first half is due June 15, 2018. The payment will be applied if the resident has no other outstanding balances.

Anyone requesting a refund should call the City’s Treasury Division at payments@alexandriava.gov or 703-746-3902, Option 8. Be sure to mention the taxpayer’s name, the address of the applicable property, the type of tax prepaid, the prepayment amount, the date paid, and the method of prepayment (in-person, by mail, etc). Refunds could take up to six weeks to process.

Editor's note: The article has been updated to reflect the IRS's advisory on prepayments.

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